I used to edit Innovation Management. My book, "The Elastic Enterprise", co-authored with Nick Vitalari and described as a must read for companies that want to succeed in the new era of business - looks at how stellar companies have gone beyond innovation to a new form of wealth creation. I speak on new innovation paradigms.
I started my writing career in broadcasting and then got involved in the EU's attempt to create an ARPA-type unit, where I managed downstream satellite application pilots, at just the time commercial satellite services entered the market. I also wrote policy, pre the Web, on broadband applications, 3G (before it was invented), and Wired Cities.
I have written for many major outlets like the Wall St Journal, Times, HBR, and GigaOm, as well as producing TV for the BBC, Channel 4 and RTE. I am a research fellow at the Center For Digital Transformation at UC Irvine, where I am also an advisory board member, advisory board member at Crowdsourcing.org and Fellow of the Society for New Communications Research.
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Apple's Problem Is America's Problem is Apple's Problem

US Secretary of State Hillary Clinton (L) talks with South African Minister of International Relations and Co-operation Maite Mashabane on August 7, 2012. The United States is the third largest source of foreign direct investment in Africa's biggest economy. (Image credit: AFP/Getty Images via @daylife)

Apple‘s problem is it doesn’t know how to grow its business. Not with respect to the huge chunk of money sitting in its various bank accounts ($137 billion). In that sense Apple is the story of American capitalism gone wrong.

The company has become an accumulation machine and reflects the problems of the American economy – hugely innovative and successful but paralyzed in the face of the 21st century’s investment needs.

Last week’s report from Bain and Co shows that the sheer level of capital accumulation is now a fundamental of the global economy. Though there is growth in underlying GDP around the world, the growth of financial assets is much faster.

But the irony in this is that the majority of assets still reside in the US and Europe. They are not finding their way to investment projects in emerging markets and are tending instead to inflate asset prices.

There are two clear lessons just from that report – American and European companies are under-serving real economic growth, and we will pay for that neglect in the long term. And investment horizons need to be longer term anyway – there is so much cash to burn that the time is ideal for long imaginative projects..

Companies like Apple, Google, Philips need to be evolving new paradigms in new economies not just trying to sell them on high margin devices or new ad mechanisms. Apple in fact needs to being painting a picture of itself as the post-device company, as Google might well do with Project Glass.

“Forget about the past and start anew,” Lee exhorted employees in his New Year’s address on Jan. 2. “We must search out new businesses that Samsung’s survival depends on.”

What would a post-iPhone Apple look like? If you are an investor you have a right to know.

Anything that needs a liberating interface could be an Apple product or service. And the real economic needs of the growing world do not fit into the palm of your hand.

It needs to engage in whatever this crazy, chaotic, fast changing world wants of it because for as long as Americans sit back and congratulate themselves on their innovativeness, China will mop up the loyalties and markets of emerging market after emerging market. Apple has a role to play in imagining how these economies will benefit from its ingenuity. And time is tight.

News that China’s trade in goods now exceeds that of the United States is no surprise but it comes with some reassuring qualifiers. Add in services and the USA is still top. The US economy is still twice the size of the Chinese and per capita income is five times that of China’s.

The problem though is that nobody outside of the USA is looking for caveats when they observe the relative decline of American power. It feels like a result.

Yet, the USA still has the best and richest tech companies – yes, look at Apple and Google, just ahead of Samsung and likely to be overwhelmed by the new generation of Chinese tech companies that enter new markets with a development agenda as well as a product to sell.

The problem for America is not knowing how to use these great companies and their gifts, brains, and resource in strategic ways for the US economy. The problem for Apple is strangling itself with its device-focus and its inability to graft a development role onto its bank account.

Of course it is their market-given right not to spend its money but I am 100% sure that the US economy cannot prosper if its best companies hoard cash on this scale and I am as sure that competitor regions are happy to see them idle that cash away.

The cash hoards in fact are beyond imagination – can you conceive of how to spend $137 billion? Here is the crux of it, I think. Apple, like America, cannot conceive of its responsibilities in the wider world.

America and its companies lack a capitalist-driven agenda to participate in the great economic battles taking place in Africa and India and maybe that’s because they can skim decent margins on devices in China. According to The Guardian:

“America will stand up for democracy and universal human rights even when it might be easier to look the other way and keep the resources flowing.”

Well ok, you might say but where is America’s agenda for accelerating balanced development, for securing water for all or for promoting clean air, for involving its companies in the real economic needs of the day rather than selling to high end device markets?

It’s hard to escape the impression that in America the rest of the world is perceived as a potential labor force either for building devices cheaply or for importing as brains who might then become entrepreneurs who rescue the American economy.

This implicit narrative of America’s place in the world is reflected in comments about Apple. It’s only responsibility is is customers and fashioning products that delight them. Give me a break. A cash pile of $137 billion carries huge responsibilities especially if your culture lies at the intersection of technology and the liberal arts.

And what about the other side of the coin – America entrepreneurs settling in Africa or India and building new companies there that promote an American cultural ideal?

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The shareholder does not need to know what a post iPhone Apple looks like.

If Apple has a plan to replace the iPhone do you seriously propose they lay out a blueprint for their competitors to follow?

“And investment horizons need to be longer term anyway ” Then the media and government needs to stop listening to Wall Street. If you want true long term investments then we need to stop the blasting of companies for missing some projection for the current quarter and pay more attention to what the plan is 5 and 10 years from now.

Apple is case in point. Their numbers did not meet the streets expectations so they get hammered and every Tom, Dick and Harry comes out of the wood work demanding cash. They don’t ask about what the plans are to improve iTunes, Siri, Maps, iCloud. They demand cash.

Listen, the only people makiing a lot of written noise are the Forbes & Bloomberg’s of the world. The problem is that no believes anything they read on the internet. And they don’t read newspapers or magazines anymore.

So, the real noise is Apple’s cash machine raking in the cash. The more the media bashes Apple for the sake of bashing success; well, the more the next generation is going to devalue any news they get from the media as contrived propaganda. It’s that simple. The media is digging its own grave by picking on Apple.

You have wrongly labeled Apple as a high margin device maker, when in fact they are a brilliant innovator that has changed the face of mobile computing and communication. They have developed an entire ecosystem that is changing people’s lives everywhere, and which is driving a groundswell of innovation around the world.

As to their cash on hand, you somehow fail to realize that it is in fact far less than the amount stated as to put it to use they would need to pay a significant amount of taxes, reducing the total considerably. Further, you somehow fail to realize that the money is in fact already being put to use through investments, as well as when it is simply sitting in the bank collecting interest as the bank is making loans with a considerable portion of deposits.

And despite what hack journalists have said in the recent past, Apple products are being made by 100′s of thousands of young workers from rural areas being paid higher wages than average for factory workers, in clean, well lit modern factories. Meanwhile they are making more in one month than their whole family back home makes in an entire year! They are not only saving money for their own future, but sending money home to help their families, like helping to pay for a sibling’s education, and basic necessities.

Capital accumulation is not evil, and it is certainly better than what transpired in 2008. As a stockholder, I expect Apple to be cautious and judicious in how it spends my money.

I think they should invest in new economies such as African, south American and so on. Roberto Macio Chief Marketing Officer Abogados en Buenos Aires www.abogadosbuenosaires24h.com Buenos Aires Abogado